Fair Labor Standards Act – Employment Law Worldviewhttps://www.employmentlawworldview.com
Thu, 21 Mar 2019 13:25:50 +0000en-UShourly1https://wordpress.org/?v=4.9.10Déjà Vu All Over Again: U.S. Department of Labor Previews New(-ish) FLSA Overtime Exemption Requirements (Again)https://www.employmentlawworldview.com/deja-vu-all-over-again-u-s-department-of-labor-previews-new-ish-flsa-overtime-exemption-requirements-again/
https://www.employmentlawworldview.com/deja-vu-all-over-again-u-s-department-of-labor-previews-new-ish-flsa-overtime-exemption-requirements-again/#respondThu, 07 Mar 2019 23:26:22 +0000https://www.employmentlawworldview.com/?p=7354Continue Reading]]>For years – spanning two Presidential administrations – employers have been awaiting long-anticipated updates to the overtime exemption regulations to the Fair Labor Standards Act (FLSA). Since 2004, to be exempt from the FLSA’s overtime compensation requirements under the so-called “white collar” exemptions (e.g., executive, administrative, professional employees), employees must be paid on a salary basis at least $455/week as well as perform specific, defined exempt duties. In 2016, during the latter stages of the Obama administration, the Department of Labor announced that it was implementing new regulations that would raise the salary threshold requirement to $913/week, a substantial increase that would have resulted in as many as four million exempt workers being reclassified to non-exempt overnight. But on November 22, 2016, shortly after the Presidential election, a federal district court judge in Texas enjoined the new salary threshold rule and, despite some further (and still ongoing) appellate skirmishing, effectively invalidated its implementation.

Since then, employers have looked to the present administration wondering whether, when, and to what extent the FLSA regulations may change. After much speculation, the Department of Labor released on March 7, 2019 a proposed rule to amend the overtime regulations. Under the proposed rule, workers who earn less than $679 per week ($35,308 per year) would be automatically eligible for overtime for all hours worked beyond 40 hours per workweek. This is an increase from the current threshold, but not as high as the threshold proposed by the Obama administration. Further, the salary threshold would be revisited every four years through new proposed rulemaking, rather than subject to an automatic annual lockstep increases as the Obama administration had endorsed.

The new proposed threshold incorporates methodology used in 2004, under the Bush administration, for determining which workers should, based on wages alone, be treated as overtime-eligible, but has been adjusted to reflect current average wages. Because the methodology has survived scrutiny for so many years, the new proposed rule may be less susceptible to judicial challenge for overreach than the Obama-era proposal. And, although not as sweeping as the prior proposed rule, if enacted, the amended regulations may result in as many as one million workers becoming overtime-eligible. There is no anticipated change to the duties tests, so reclassification – if any – will be based on salary alone. After a period of notice and comment rulemaking, a final version is expected shortly before the 2020 election. We will continue to update you as the rule advances and if and when it is adopted, along with advice on how to implement cost-effective business solutions to minimize the added costs associated with this change.

]]>https://www.employmentlawworldview.com/deja-vu-all-over-again-u-s-department-of-labor-previews-new-ish-flsa-overtime-exemption-requirements-again/feed/0laura.robertson@squirepb.comDepartment of Labor Says Employers Are Not Required to Pay Tipped Employees the Full Minimum Wage for Non-Tipped Activities (US)https://www.employmentlawworldview.com/department-of-labor-says-employers-are-not-required-to-pay-tipped-employees-the-full-minimum-wage-for-non-tipped-activities-us/
https://www.employmentlawworldview.com/department-of-labor-says-employers-are-not-required-to-pay-tipped-employees-the-full-minimum-wage-for-non-tipped-activities-us/#respondTue, 19 Feb 2019 23:50:00 +0000https://www.employmentlawworldview.com/?p=7328Continue Reading]]>Under the Fair Labor Standards Act (“FLSA”), employers are required to pay non-exempt employees a minimum hourly wage of $7.25. However, employers with “tipped employees” are able to pay such employees a cash wage of $2.13 per hour and take a “tip credit” toward their minimum wage obligation to make up the difference between the cash wage and the federal minimum wage. Importantly, the FLSA differentiates between tipped employees who perform “dual tasks,” such as incidental duties that do not produce tips, and employees who have a “dual job,” meaning they are employed by the same employer to do both a tipped job and a non-tipped job. The U.S. Department of Labor’s Wage and Hour Division (“WHD”), charged with enforcing the FLSA, recently changed its position on when employers must pay employees with “dual tasks” the full minimum wage for time spent on non-tipped activities.

On November 8, 2018, WHD issued an opinion letter stating that employers are allowed to pay tipped employees a tipped wage less than the federal minimum wage for hours spent on non-tip-producing duties that are incidental to their main job. Previously, the WHD operated under an Obama administration mandate known as the “80/20” rule, which required employers to pay tipped workers the full minimum wage for time spent on side-work duties that do not result in tips (such as filling saltshakers and rolling silverware) when those duties make up at least 20 percent of the worker’s weekly hours. WHD’s Department’s November 2018 opinion letter altered this policy, explaining that employers are not required to pay tipped employees minimum wage for hours spent on non-tip-generating work incidental to their main job.

On February 15, 2019, WHD issued two new guidance documents supporting the position outlined in the November 2018 opinion letter. First, it revised its internal Field Operations Handbook (at section 30d00(f)) and updated its website to be consistent with its new enforcement policy. In addition, it released Field Assistance Bulletin 2019-2, which explains WHD’s reasons for the policy change, among them, that the previous policy created confusion regarding whether federal law requires certain related, non-tipped duties to be excluded from the tip credit. Further, the bulletin states that the new interpretation applies to investigations both prospectively and retroactively, meaning that the change could impact ongoing litigation between tipped workers and their employers.

WHD’s new policy likely will provide more clarity for employers with tipped workers. However, it is important for these employers to remember that they are still prohibited from keeping tips received by their employees, regardless of whether the employer takes a tip credit under the FLSA. Further, employers are still required to make up the difference if an employee’s tips combined with his or her direct (or cash) wages do not add up to the minimum hourly wage of $7.25 per hour. Finally, this policy clarification applies only to interpretations of the FLSA; state minimum wage laws may differ, so employers are encouraged to consult with local counsel to ensure that they are compliant with both federal and state wage payment laws.

]]>https://www.employmentlawworldview.com/department-of-labor-says-employers-are-not-required-to-pay-tipped-employees-the-full-minimum-wage-for-non-tipped-activities-us/feed/0melissa.legault@squirepb.com, laura.robertson@squirepb.comUS Supreme Court to Reconsider Key Agency Deference Standardhttps://www.employmentlawworldview.com/us-supreme-court-to-reconsider-key-agency-deference-standard/
https://www.employmentlawworldview.com/us-supreme-court-to-reconsider-key-agency-deference-standard/#respondFri, 15 Feb 2019 18:15:34 +0000https://www.employmentlawworldview.com/?p=7307Continue Reading]]>Our colleague Brent Owen at the FrESH Law Blog (which covers perspectives on Environmental, Safety, and Health law) authored the post below addressing the US Supreme Court’s upcoming decision in Kisor v. Wilkie, which will address the Auer standard of deference that is applied by the courts to administrative agencies’ interpretations of their regulations. Although Kisor involves the Department of Veterans Affairs, the ruling is anticipated to have broad implications for agency action, including agencies that regulate employment matters, such as the Department of Labor and the Equal Employment Opportunity Commission. Accordingly, employers should be keeping an eye on this case – we’ll be doing the same and will update you when the Court rules.

US Supreme Court to Reconsider Key Agency Deference Standard

Often called the fourth branch of government, administrative agencies implement the labyrinth of federal regulations governing people and companies in the United States. Administrative agencies play a particularly important role in regulating environmental, health, and safety in the United States. Those administrative agencies may soon face greater scrutiny from federal courts in their interpretation of their own regulations. This development could give businesses—particularly those in highly regulated industries—more opportunities to challenge, limit, or at least better anticipate their regulatory burden.

This term in Kisor v. Wilkie, the US Supreme Court will consider whether to overturn Auer deference; the rule that courts must defer to an agency’s construction of its own regulation unless that interpretation “is plainly erroneous or inconsistent with the regulation.” This development fits with the broader trend that we identifiedlast year—the Court’s growing skepticism about deferring to legal determinations made by administrative agencies. Last year, we explained the Court’s hostility to Auer deference’s controversial cousin, the Chevron doctrine, which requires courts to defer to an agency’s reasonable interpretation of a statute.

What is Kisor about?

Though it implicates the core operations of the administrative state, Kisor involves a prosaic dispute. James Kisor, a Vietnam War veteran, seeks disability benefits dating back to 1983 based on service records he contends the agency overlooked. The lower court deferred to the Department of Veterans Affairs’ interpretation that “relevant” means only information “noncumulative and pertinent” to the matter. Siding with the agency, the lower court rejected Mr. Kisor’s more commonsense interpretation that “relevance” means any fact with “any tendency to make a fact more or less probable” when the “fact is of consequence in determining the action.” (Mr. Kisor’s proposed definition tracks the Federal Rules of Evidence.)

Notably, the agency only rendered its claim-defeating interpretation when it denied Mr. Kisor relief. In other words, the agency “interpreted” its own regulation to ensure that Mr. Kisor lost after Mr. Kisor initiated his challenge and in the context of his particular dispute. Neither Mr. Kisor nor any other veteran received advance warning that the Department of Veteran Affairs might adopt a stilted reading of “relevant” until it did. Despite that, and consistent with the lenient Auer deference standard, the lower court deferred to the agency’s interpretation of “relevant” and declined to give the word its more natural meaning.

Why does Auer deference matter?

As Mr. Kisor’s case illustrates, Auer deference guides how agencies regulate the individuals and businesses subject to their jurisdiction. Particularly for companies competing in heavily regulated markets, Auer deference often means that regulated companies receive no notice about how an agency will interpret and implement its own regulations. And, in turn, without notice, companies cannot comment on or oppose the agency’s regulatory guidance.

Notably too, Auer deference allows agencies to make substantive policy changes without complying with the notice-and-comment requirements of federal administrative law. Agencies, particularly in the environmental, health, and safety context, often make substantive policy changes through nonbinding guidance. As one example, in 2013 the US Supreme Court deferred to guidance regulating water runoff for logging companies even though the US EPA promulgated that guidance mid-litigation. As that case and Mr. Kisor’s illustrate, Auer deference often increases regulatory uncertainty and burden, while insulating agencies from challenge or correction through the federal courts.

Proponents of Auer deference contend that it improves agencies’ operations because it gives agencies the flexibility to implement their own vague regulatory guidance—insulated from second-guessing by non-expert federal judges. They argue that the doctrine helps ensure the smooth operation of administrative agencies.

Either way, the Court’s decision in Kisor may mean significant changes in the ways administrative agencies go about their work.

What happens next?

The Court in Kisor agreed to hear the case only to address whether it should overrule Auer deference. It follows that the Court will likely address Auer’s continued viability this term. If, as some anticipate, the Court overrules Auer deference, it may reflect just an initial step in a fundamental change about how the fourth branch of government operates.

Squire Patton Boggs will continue to monitor this case and provide updates.

]]>https://www.employmentlawworldview.com/us-supreme-court-to-reconsider-key-agency-deference-standard/feed/0daniel.pasternak@squirepb.comUS Supreme Court Unanimously Rules in Favor of Workers, Holding Trucking Company’s Arbitration Agreement Exempt From Federal Arbitration Acthttps://www.employmentlawworldview.com/us-supreme-court-unanimously-rules-in-favor-of-workers-holding-trucking-companys-arbitration-agreement-exempt-from-federal-arbitration-act/
https://www.employmentlawworldview.com/us-supreme-court-unanimously-rules-in-favor-of-workers-holding-trucking-companys-arbitration-agreement-exempt-from-federal-arbitration-act/#respondTue, 15 Jan 2019 18:44:31 +0000https://www.employmentlawworldview.com/?p=7210Continue Reading]]>On January 15, 2019, the United States Supreme Court held in New Prime Inc. v. Oliveira that a trucking company could not compel its drivers, which it classified as independent contractors, to arbitrate their wage and hour claims against the company because Congress intended to exempt all interstate transportation workers from the Federal Arbitration Act (“FAA”). Section 1 of the FAA exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” from arbitration. In New Prime, the Court examined two issues: (1) whether the application of the Section 1 exemption is an issue for courts or an arbitrator to decide, even if the parties have agreed that issues of arbitrability are to be decided by the arbitrator; and (2) whether the “contracts of employment” language in Section 1 of the FAA applies to agreements only involving employees, or if it also applies to transportation workers classified as independent contractors.

On the first issue, the Court affirmed the lower court’s ruling that a court should decide for itself whether Section 1’s “contracts of employment” exclusion applies before ordering arbitration, even if the agreement delegates that determination to the arbitrator. On the second issue, the Court interpreted the “contract of employment” language based on what the ordinary meaning of those words were when Congress enacted the statute in 1925. In so doing, it concluded that back then, the term “employment” was synonymous with “work,” and thus Congress intended for the Section 1 exemption to apply to any person working in the interstate transportation industry. Therefore, the Court held that the FAA’s exclusion for interstate transportation workers applies to all such workers, regardless of their classification as an employee or independent contractor.

The Court’s ruling in New Prime was unanimous, authored by Justice Gorsuch, with only Justice Ginsberg writing a separate concurring opinion (Justice Kavanaugh took no part in the consideration or decision). The ruling is noteworthy particularly because the Court, with a conservative majority, chose to interpret the FAA in a way that expands worker’s rights. Practically speaking, the decision will undoubtedly have a broad and sweeping impact on the interstate transportation industry given that it relies heavily on the independent contractor framework.

With the Court’s decision in New Prime and its decision on January 8, 2019 in Henry Schein v. Archer & White Sales, Inc. (which we blogged about here), only one arbitration-related case remains for decision from the October 2018 term. That case – Lamps Plus, Inc. v. Varela, No. 17-988 (argued Oct. 29, 2018) – discussed in our prior post here, will resolve whether the FAA prevents a state-law interpretation of an arbitration agreement that would allow class arbitration based only on general, commonly- used language in arbitration agreements and not on express contract language. We’ll let you know when that decision issues.

]]>https://www.employmentlawworldview.com/us-supreme-court-unanimously-rules-in-favor-of-workers-holding-trucking-companys-arbitration-agreement-exempt-from-federal-arbitration-act/feed/0daniel.pasternak@squirepb.com, melissa.legault@squirepb.comPost-Epic Systems, Kentucky Supreme Court Holds That Under State Law, Employers Cannot Require Mandatory Arbitration Agreements as a Condition of Employment (US)https://www.employmentlawworldview.com/post-epic-systems-kentucky-supreme-court-holds-that-under-state-law-employers-cannot-require-mandatory-arbitration-agreements-as-a-condition-of-employment-us/
https://www.employmentlawworldview.com/post-epic-systems-kentucky-supreme-court-holds-that-under-state-law-employers-cannot-require-mandatory-arbitration-agreements-as-a-condition-of-employment-us/#respondMon, 08 Oct 2018 19:28:38 +0000https://www.employmentlawworldview.com/?p=7053Continue Reading]]>Earlier this year, the United States Supreme Court held in Epic Systems Corp. v. Lewis that employers can require employees to agree to arbitrate disputes between them solely on an individual basis and to waive class and collective action litigation procedures without running afoul of federal law. (See our post here). Addressing an issue not explicitly discussed in Epic, the Kentucky Supreme Court recently held in Northern Kentucky Area Development District v. Snyder that where employment is conditioned on the employee agreeing to arbitrate claims – that is, agreeing to arbitrate is a requirement to getting (or keeping) a job – that requirement violates Kentucky state law.

Northern Kentucky Area Development District (“NKADD”) is a government entity funded by taxpayers to administer social programs throughout Northern Kentucky. Danielle Snyder worked for NKADD and signed an arbitration agreement as a condition of her employment. After being terminated, Snyder sued NKADD under the Kentucky Whistleblower Act and the Kentucky Wages and Hours Act. NKADD immediately moved to stay the proceedings and to compel arbitration based on the parties’ arbitration agreement. Both the trial court and the state appellate court denied NKADD’s motion. The case went up to the Kentucky Supreme Court.

The case hinged on the court’s interpretation of Kentucky Revised Statute (“KRS”) 336.700(2), and its determination as to whether that statute is preempted by the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq. Under the Kentucky statute, employers are prohibited from conditioning current or prospective employees’ employment on their agreement to arbitrate or waive claims they may have against their employer. The FAA, however, broadly protects arbitration agreements and, through the Constitution’s Supremacy Clause, preempts statutes that attack or discriminate against the use of such agreements. According to the court, the FAA preempts any state statute that directly discriminates against or prohibits arbitration agreements entirely.

Nonetheless, the court held that KRS 336.700(2) is not preempted by the FAA because it does not actually single out or discriminate against all arbitration agreements. Rather, the court explained the statute simply prevents an employer from conditioningemployment on the employee’s agreement to arbitrate. Further, the court reasoned that the statute is not an anti-arbitration provision, but instead is an anti-employment discrimination provision that “uniformly voids any agreement diminishing an employee’s rights against an employer when that agreement had to be signed by the employee on penalty of termination or as a predicate to working for that employer.” Therefore, the court held that the FAA does not preempt KRS 336.700(2), and NKADD’s agreement violates the state statute.

How long this case will remain binding precedent in Kentucky is unclear. It likely will be challenged and could be overridden by changes made to the statute by the Republican-controlled Kentucky General Assembly, or possibly appealed to the United States Supreme Court. (Interestingly, the Kentucky Supreme Court did not cite to or reference Epic Systems Corp. in its decision.) Until this ruling is challenged, Kentucky employers (and multi-state employers with employees in Kentucky) who currently require arbitration agreements as a condition of hire or continued employment will need to think about how they want to proceed to avoid having those agreements invalidated by Kentucky state courts. Although there are a number of potential ways to proceed, some options include allowing employees to “opt out” of the mandatory arbitration provision or removing entirely the conditional language from agreements to avoid the application of KRS 336.700(2). Further, although not necessarily desirable, employers could chose to forego any form of arbitration until the issue is resolved fully and finally in Kentucky. Employers are encouraged to consult with counsel regarding any changes to their arbitration agreements in light of this new ruling.

]]>https://www.employmentlawworldview.com/post-epic-systems-kentucky-supreme-court-holds-that-under-state-law-employers-cannot-require-mandatory-arbitration-agreements-as-a-condition-of-employment-us/feed/0daniel.pasternak@squirepb.com, melissa.legault@squirepb.comUS Supreme Court Begins New Term with Three Arbitration Cases Set for Oral Argument in Octoberhttps://www.employmentlawworldview.com/us-supreme-court-begins-new-term-with-three-arbitration-cases-set-for-oral-argument-in-october/
https://www.employmentlawworldview.com/us-supreme-court-begins-new-term-with-three-arbitration-cases-set-for-oral-argument-in-october/#respondMon, 08 Oct 2018 00:31:37 +0000https://www.employmentlawworldview.com/?p=7050Continue Reading]]>We’ve been keeping you apprised of the many developments over the past few years coming from the United States Supreme Court and other courts concerning agreements between employers and their employees to arbitrate disputes arising out of the employment relationship. The Supreme Court’s decision last term in Epic Systems v. Lewis, which we discussed in our post here, garnered significant attention as it addressed the National Labor Relations Board’s (“NLRB”) several-years’-running position that arbitration agreements with class or collective litigation waivers illegally restrain employees in the exercise of concerted activity protected under the National Labor Relations Act (“NLRA”). In Epic Systems, the Supreme Court rejected the NLRB’s position, holding that class action litigation is court procedure and not a substantive right or an activity protected under the NLRA. The Court thereby preserved employers’ ability to limit disputes to individual claims in arbitration without running afoul of employee rights under the NLRA to act together to improve their work environment.

The Supreme Court’s new term began as it always does, on the first Monday in October. On the Court’s docket in its first month are three more arbitration cases – one of which also deals with class action litigation. All three cases involve various aspects of the reach or interpretation of the Federal Arbitration Act (“FAA”).

The Supreme Court heard its first arbitration case during Wednesday, October 3’s oral arguments in New Prime, Inc. v. Oliveira, (the First Circuit’s opinion below reported at 857 F. 3d 7). In this case, the Supreme Court is being asked to determine whether Section 1(a) of the FAA, which excludes certain transportation “workers” from the FAA’s purview, applies to independent contractors, in addition to the employees, of a transportation company. The Supreme Court also has been asked to address whether the application of the Section 1(a) exemption is a threshold issue that should be decided by a court before ordering a case to arbitration, even when the parties’ arbitration agreement contains a clear delegation provision assigning questions of the arbitrator’s jurisdiction to the arbitrator and not a court. In the case below, the First Circuit answered “yes” to the first question, finding that the term “workers” under Section 1(a) of the FAA includes traditional employees and independent contractors. If the Supreme Court adopts this interpretation, it could have a noteworthy impact on the transportation industry, which widely relies on the services of independent contractors. These individuals, in addition to employees, may not be subject to arbitration despite otherwise valid arbitration agreements between themselves and a transportation company. This outcome also could lead to the expansion of other laws that have traditionally been limited to the employer/employee relationship and not independent contractors. In the underlying decision, the First Circuit also held that the determination of whether the claims at issue are exempt from the FAA under Section 1(a) is a “gateway” question to arbitrability that should be answered by a court, regardless of a valid delegation provision in an arbitration agreement. The upshot of this outcome is that despite contractual language agreed between the parties stating that an arbitrator should decide whether he or she can hear a case, in part or whole, the Section 1(a) question is an exception to such a provision. Early commentators on the Oliveira oral argument believe the Justices’ lines of questioning clearly indicated that the Court leans in the direction of a broad interpretation of the FAA exemption to include independent contractors, and that courts, and not arbitrators, should analyze the application of the exemption.

Lamps Plus, Inc. v. Varela, is scheduled for oral argument on October 29, 2018. It comes to the Supreme Court from the Ninth Circuit (opinion is reported at 701 F. App’x 67). This case arises out of the Supreme Court’s 2010 decision in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., wherein it held that state courts cannot order class arbitration unless there is a contractual basis to do so. In Varela, the Ninth Circuit held that, under the contract law of California (the state by which the arbitration agreement at issue is governed), the parties’ intention to allow class and collective claims in arbitration could be inferred from the agreement’s commonly-used language, which in this case was, “arbitration shall be in lieu of any and all lawsuits or other civil proceedings.” The lower court concluded that the phrase “other civil proceedings” includes class actions, therefore, there was a contractual basis to find that the parties meant to replace class litigation in court with class litigation in arbitration. In its petition to the Supreme Court, Lamps Plus opposed the Ninth Circuit’s decision by arguing that under the FAA, class arbitration is disfavored because it is inconsistent with the purpose of arbitration to streamline litigation. Accordingly, it argued that parties to an arbitration agreement must clearly and explicitly authorize class arbitration, or be limited to individual, bilateral litigation in the arbitration forum. This case provides the Supreme Court with the opportunity to define the contours of its holding in Stolt-Nielsen by explaining just how parties can indicate their assent to participate in class arbitration and whether the FAA precludes an inference in favor of class arbitration based on general contract language that does not specifically address class or collective litigation procedures. A less likely, but possible outcome would be for the Court to defer the FAA issue by ruling that the Ninth Circuit misapplied California contract law.

Also set for oral argument on October 29, 2018, is the third arbitration case on the Supreme Court’s docket this term. Although not an employment case, Henry Schein v. Archer & White Sales, Inc. (Fifth Circuit Court of Appeals decision reported at 878 F.3d 488), like Oliveira, addresses whether a court or an arbitrator should be charged with making threshold determinations about the arbitrability of claims. In this case, the parties had entered into an arbitration agreement stating they would resolve all legal disputes in arbitration, except claims for injunctive relief and involving intellectual property rights. The plaintiff’s case included a claim that sought injunctive relief among other remedies; he thus argued that the court where the case was filed should refrain from ordering the parties to arbitration because the claim seeking injunctive relief was not arbitrable. The defendants argued that the terms of the arbitration agreement provided that any questions about the arbitrability of the case or a specific claim was to be decided by the arbitrator. The trial court’s magistrate judge found that the arbitration agreement’s delegation language, when combined with the language carving out claims for injunctive relief, could reasonably be interpreted in both manners suggested by the parties. However, the District Court judge and the Fifth Circuit both discarded this interpretation, and instead found that the defendant’s claim that the parties to the arbitration agreement intended the arbitrator to handle the arbitrability of a carved-out claim was “wholly groundless.” Although its analysis was brief, the Fifth Circuit held that the language of the parties’ arbitration agreement was clear and the court should determine the arbitrability of the entire litigation when it included a carve-out claim, such as injunctive relief. The defendants’ case before Supreme Court argues that the “wholly groundless” doctrine used by the Fifth Circuit is too subjective and violates the federal policy favoring arbitration expressed in the FAA. Having suggested their lean toward court determination of arbitrability issues in the Oliveira argument, the Supreme Court may take a similar tact in Henry Schein. On the other hand, the Court could also distinguish this case by the fact that these parties agree they have a valid arbitration agreement that governs the terms of their arbitration, and not an overarching statutory exemption to arbitration such as exists in Oliveira.

Although employers can continue to feel confident that arbitration agreements with their employees are a valid mechanism to limit employment-related disputes to the arbitration forum, some of the contours of these agreements continue to be defined through ongoing litigation, such as the cases above. The outcomes in these cases may impact how employers draft their arbitration agreements to ensure parties get the exactly the arbitration they are bargaining for. Stay tuned as we continue to update you on the outcomes of these cases, and their effects on employer arbitration agreements.

]]>https://www.employmentlawworldview.com/us-supreme-court-begins-new-term-with-three-arbitration-cases-set-for-oral-argument-in-october/feed/0daniel.pasternak@squirepb.comEyes and Ears on the FLSA – U.S. Department of Labor Issues New Opinion Letters and Schedules Public Listening Sessions (US)https://www.employmentlawworldview.com/eyes-and-ears-on-the-flsa-u-s-department-of-labor-issues-new-opinion-letters-and-schedules-public-listening-sessions-us/
https://www.employmentlawworldview.com/eyes-and-ears-on-the-flsa-u-s-department-of-labor-issues-new-opinion-letters-and-schedules-public-listening-sessions-us/#respondWed, 05 Sep 2018 16:15:13 +0000https://www.employmentlawworldview.com/?p=6997Continue Reading]]>On August 28, 2018, the Wage and Hour Division of the United States Department of Labor (“WHD”) issued four new opinion letters interpreting various aspects of the federal Fair Labor Standards Act (“FLSA”). In addition, the WHD has announced plans to analyze and consider changes to the FLSA’s white collar overtime exemption regulations applicable to executive, administrative, professional, and outside sales employees. To support this effort, the WHD has scheduled five public listening sessions in various locations across the country (a list of which you can find here), which it invites the public to attend and provide comment. The key questions to be addressed at these sessions surround the pros and cons of adjusting the salary basis – the salary level employees must meet in order to be deemed exempt under the white collar overtime exemptions. We will be sending representatives and encourage you to contact us with any questions or feedback you would like us to raise at these sessions.

Regarding the opinion letters, as you may recall from our prior blog posts (for example, here and here), the WHD resumed issuing opinion letters in mid-2017. Opinion letters are official written interpretations of the FLSA, as those laws apply in specific factual situations. Although the opinion letter topics are generally brought to the WHD by a specific person or entity, as you will see from below, many of the situations they present have broader applicability to a range of employers. Keeping abreast of the WHD’s opinions can help employers avoid the pitfalls embedded in the nuances of the laws it enforces. Below is a summary of these new opinion letters, and a link their text:

Voluntary employer-sponsored wellness events not compensable time under the FLSA. Employees who voluntarily participate in employer-sponsored wellness activities, such as biometric screening, health and gym classes, or benefits fairs that are designed to lower an individual employee’s health insurance policy premiums and provide other benefits to employees that does not relate to the performance of their job, and from which the employer obtains no financial benefit, predominately benefit the employee, therefore they are not compensable work time under the FLSA.

Non-profit professional credentialing organization graders are “volunteers” under the FLSA. A non-profit organization who administers professional exams necessary for professional credentialing selects a group of its credentialed members to serve as exam graders for a period of 1 or 2 weeks, whereby they travel to testing locations to perform these services. The organization pays the direct expenses related to the graders’ travel. Graders report they perform the services willingly in the effort to give back to their professional community and to the credentialing organization. Under the FLSA, individuals who provide services to non-profit organizations may be properly classified as volunteers if they offer their services willingly without any expectation of compensation, free from any coercion or undue pressure. Under the circumstances presented by the credentialing organization employer, exam graders meet this standard and can be unpaid volunteers.

Internet payment software platform sales employees may be exempt from FLSA overtime. Employees may not be entitled to overtime if they 1) work in retail or service establishment, 2) earn a regular rate of pay that is more than 1 ½ times the applicable minimum hourly wage in a given workweek in which they work overtime, and 3) derive more than half of their earnings from sales commissions. This is known as the “retail and service establishment” exemption to the FLSA’s overtime provisions. The WHD found that an employer whose business is selling internet payment software platforms to retailers and others who sell products online, was considered a “retail sales entity” because it sold its platform directly to the user, in small quantities, for the user’s own use in business, rather than re-sale (such as wholesale sales). This was not changed by the fact that the employer’s sales are made predominately online. Accordingly, the organization’s employees who meet the earnings requirements above may be exempt from overtime.

Movie theater overtime exemption applies to in-theater-restaurants. The FLSA exempts from overtime all employees of establishments that are primarily engaged in the exhibition of motion pictures (the WHD defines “primarily engaged” to mean at least 50% of the available operation time is spent showing movies). The exemption applies to all employees of a qualified establishment, regardless of the work they perform. This recent opinion letter clarifies that movie theaters with in-theater dining, and even some with onsite, full-service restaurants, may qualify for the movie theater exemption if the food service is “functionally integrated” with the theater operations. Based on the facts presented in the letter, movie theaters with in-theater dining will qualify for this exemption if the food service and theater operations share common: 1) physical premises without a distinct barrier or separation; 2) business, financial, and other record keeping, such as entity name, taxes, and payroll; and 3) employees, and their primary source of revenue is showing movies.

This week, U.S. Secretary of Labor Alexander Acosta announced that the Department of Labor (DOL), in collaboration with other federal employment agencies, was creating an Office of Compliance Initiatives (OCI). The DOL, through its various divisions, oversees compliance with and enforces the Fair Labor Standards Act, the Family and Medical Leave Act, the Occupational Safety and Health Act, and the Uniformed Services Employment and Reemployment Rights Act, among other laws and regulations.
Secretary Acosta announced that the DOL was forming OCI in order to advance the agency’s compliance mission by aiding employers, workers, and other enforcement agencies in understanding federal employment laws.

OCI’s first step was to launch two websites – worker.gov and employer.gov – to “provide information about worker’s rights and common workplace concerns.” The sites provide information about payment of wages, workplace safety and health, retirement security, rights to protected leave, and other benefits. The site also provides information about rights protected by agencies other than the DOL, such as non-discrimination in employment (administered by the Equal Employment Opportunity Commission and the Department of Justice) and the right to organize and engage in collective workplace activity (a right protected by the National Labor Relations Board). The employee-focused site even walks workers step-by-step through the process of filing claims or charges with the respective federal agencies, with links to complete the process.

Critics say that the creation of OCI reflects the DOL’s growing emphasis on compliance rather than aggressive agency enforcement. (In April 2018, we reported on the DOL’s new pilot Payroll Audit Independent Determination, or PAID, program, which allows employers to voluntarily resolve wage underpayments without federal sanctions, which has been harshly criticized by Democrats, including Sen. Elizabeth Warren (D-MA).) However, Secretary Acosta remarked during his announcement of the OCI initiative that “vigorous enforcement and compliance assistance go hand in hand.” In addition to providing direct-to-consumer information through the websites and other outreach efforts, OCI plans to assist enforcement agencies in developing new strategies to use data for impactful compliance and enforcement strategies.

On July 26, 2018, the California Supreme Court ruled in Troester v. Starbucks Corporation that the federal de minimis doctrine does not apply to a California employee’s class action wage claims. This ruling will have widespread impact, particularly on those employers with large numbers of non-exempt employees such as retailers and food service providers, as employers are now required to pay employees for even the small amounts of time spent on incidental work that occurs prior to clocking in or after clocking out.

The employee in Troester, a non-exempt Starbucks supervisor, argued that Starbucks should pay him for the roughly 4 to 10 minutes each day he spent on tasks related to closing the store after clocking out. These tasks included activating the alarm, exiting the store, locking the front door, walking coworkers to their cars pursuant to Starbucks’ safety policy, and other occasional tasks such as letting an employee back into the store to retrieve a forgotten item. The Court noted that over the 17 month period of employment, Troester’s time spent performing these unpaid tasks totaled approximately 12 hours and 50 minutes or about $102.67 in lost wages.

Starbucks argued that the federal Fair Labor Standards Act’s de minimis doctrine applied to this case and excused Starbucks’ nonpayment of wages for these small amounts of otherwise compensable time. The Court first rejected Starbucks’ argument, finding that the Labor Code and the Industrial Welfare Commission’s (IWC) wage orders had not adopted the federal de minimis doctrine. In support of its findings, the Court pointed to the language contained in these statutes and regulations which emphasize that hours worked includes “all the time the employee is suffered or permitted to work.” By emphasizing that it includes “all” time, the Court found that California law is more protective than federal law when it comes to payment of wages.

Second, the Court rejected Starbucks’ argument that the Court should recognize the de minimis rule in light of the fact that it is part of the “established background of legal principles” upon which the Labor Code and IWC wage orders have been enacted. In its ruling, the Court found that the Labor Code and the IWC wage orders are clearly concerned with small amounts of time given that employees receive 10 minute rest breaks. Along with this observation, the Court noted that it implicitly rejected a de minimum intrusion of such time in Augustus v. ABM Security Services, Inc. The Court also found support for its holding because the IWC wage orders amended its language demonstrating an intent to depart from the federal standard for waiting time and other forms of travel time. The federal Portal-to-Portal Act relieves employers from paying minimum wages or overtime for certain activities such as walking to the actual place of performing the principal activity for the employer and other preliminary or postliminary activities. In response, the IWC amended its wage orders such that hours worked included these activities. In doing so, the Court found that the IWC intended for employers to pay employees for these small amounts of time. Finally, the Court noted that the modern availability of class action lawsuits and technology advances in employer timekeeping methods both undermine the de minimis doctrine.

This case will spark a new wave of California class action lawsuits focusing on those previously uncounted minutes and perhaps even seconds of time worked by an employee. With this risk of increased exposure, employers should review their timekeeping policies and procedures. Employers should also analyze each non-exempt employees’ duties and responsibilities and minimize the risk of any off-the-clock work.

In a case of straightforward statutory interpretation, the U.S. Supreme Court held on April 2, 2018 in Encino Motorcars LLC v. Navarro that service advisors employed at car dealerships are exempt from the overtime pay requirement under the Fair Labor Standards Act (FLSA).

The dispute began in 2011, when service advisors employed by Encino Motorcars, a Mercedes-Benz dealership in California’s San Fernando Valley, sued their employer for allegedly unpaid overtime compensation. The dealership moved to dismiss their lawsuit, relying on the exemption in Section 213(b)(10)(A) of the FLSA, which exempts employers of “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements” from the requirement to pay overtime compensation. The district court granted the dealership’s motion and the service advisors appealed to the Ninth Circuit Court of Appeals, which reversed. The appeals court found that the duties performed by the service advisors did not meet the language of the statutory exemption, as their jobs did not involve servicing of cars, but rather involved meeting and greeting car owners, soliciting and suggesting repair services to fix the customer’s problem as well as suggesting other maintenance and repair services, and providing owners with cost estimates. The dealership appealed the Ninth Circuit’s decision to the US Supreme Court.

The dispute before the Court centered on whether service advisors are “salesmen” “primarily engaged” in “servicing automobiles.” Encino argued that the service advisors’ tasks meet the exemption, as courts had routinely found for decades before the Ninth Circuit’s ruling in this case. The service advisors countered they should be eligible for overtime pay because they don’t sell automobiles and don’t engage in the manual labor of maintaining or repairing automobiles.

The five-justice majority opinion, authored by Justice Clarence Thomas, deemed it unnecessary to go beyond the plain language of the FLSA to resolve the issue. The majority easily concluded that service advisors are engaged in sales, thus meeting the definition of salesmen. They further found that service advisors are “primarily engaged” in “servicing” of cars because, in this context, servicing can mean “the action of maintaining or repairing a motor vehicle” or the “the action of providing a service,” and that service advisors meet both definitions because they are integral to the servicing process by performing their service sales functions, even if they do not themselves perform the actual repair services. Justice Thomas explained that the “ordinary meaning of ‘salesman’,” “is someone who sells goods or services … Service advisors do precisely that. … [S]ervice advisors ‘sell [customers] services for their vehicles.'”

The majority specifically rejected the need to look outside the text of the statute to reach a decision. “If the text is clear, it needs no repetition in the legislative history; and if the text is ambiguous, silence in the legislative history cannot lend any clarity.” The majority also rejected the Ninth Circuit’s position that exemptions under the FLSA should be narrowly construed, concluding that nothing in the statute gives any indication that exemptions should be given anything other than a fair reading. In the end, the matter boiled down to simple proposition: “If you ask the average customer who services his car,” Justice Thomas rhetorically posed, “the primary, and perhaps only, person he is likely to identify is his service advisor.”

The Court’s ruling is a major win for not only Encino Motorcars, but thousands of car dealerships nationwide. Had the Court ruled differently, the industry could have been liable for back pay for thousands of the employees who work with customers to help them with their car service and repair needs.